{"id":5046,"date":"2010-04-19T10:40:16","date_gmt":"2010-04-19T15:40:16","guid":{"rendered":"http:\/\/2parse.com\/?p=5046"},"modified":"2010-04-19T10:40:16","modified_gmt":"2010-04-19T15:40:16","slug":"how-financial-innovation-causes-financial-crises","status":"publish","type":"post","link":"https:\/\/2parse.com\/?p=5046","title":{"rendered":"How Financial Innovation Causes Financial Crises"},"content":{"rendered":"<p>Ezra Klein explains\u00a0<a href=\"http:\/\/voices.washingtonpost.com\/ezra-klein\/2010\/04\/how_financial_innovation_cause.html\">how financial innovation causes financial crises<\/a>:<\/p>\n<blockquote><p>Investors want to make more money with less risk. Someone invents a financial product that appears to make investors more money with less risk &#8212; in this case, subprime securities. Demand for this new product explodes. But few understand this new product, and even the people who do understand the new product don&#8217;t know how it performs under stress (it&#8217;s a new product, after all). At the beginning, this actually helps the product: because its risks aren&#8217;t known, they&#8217;re ignored, and so it looks like a better deal than it is and sells more of itself than it should.<\/p>\n<p>Then something bad happens. The new product shows its flaws. And precisely because no one really understands it, the market cracks. Investors all run away at once, as they don&#8217;t really have the tools to assess the situation. Where lack of knowledge about the product originally drove demand, now it accelerates flight.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Ezra Klein explains\u00a0how financial innovation causes financial crises: Investors want to make more money with less risk. Someone invents a financial product that appears to make investors more money with less risk &#8212; in this case, subprime securities. Demand for this new product explodes. But few understand this new product, and even the people who [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[544,1032,458],"tags":[93,2749],"class_list":["post-5046","post","type-post","status-publish","format-standard","hentry","category-economics","category-financial-crisis-economics","category-the-opinionsphere","tag-ezra-klein","tag-financial-innovation"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p8qcx-1jo","jetpack_likes_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/2parse.com\/index.php?rest_route=\/wp\/v2\/posts\/5046","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/2parse.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/2parse.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/2parse.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/2parse.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5046"}],"version-history":[{"count":2,"href":"https:\/\/2parse.com\/index.php?rest_route=\/wp\/v2\/posts\/5046\/revisions"}],"predecessor-version":[{"id":5051,"href":"https:\/\/2parse.com\/index.php?rest_route=\/wp\/v2\/posts\/5046\/revisions\/5051"}],"wp:attachment":[{"href":"https:\/\/2parse.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5046"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/2parse.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5046"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/2parse.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5046"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}